The Farce of Franklin Templeton E-voting: Green for Yes, Red for No
The e-voting of unit-holders of six debt schemes of Franklin Templeton Mutual Fund (FTMF), which started on 26th December and would conclude on 29 December 2020, appears to be turned into a farce by FTMF, especially when the market regulator has been playing the role of a mute spectator. The Securities and Exchange Board of India (SEBI) has appointed TS Krishnamurthy, former chief election commissioner (CEC) as observer for the e-voting process and issued a statement on 26th December when the e-voting process had commenced. This move came a day after the Chennai Financial Markets and Accountability (CFMA) moved an urgent application before the Supreme Court (SC) against SEBI for not appointing an observer for the e-voting.
 
What is more startling is the design of the e-voting process, especially the use of green colour for 'Yes' and red colour for 'No' option with appropriate wording accompanying each. Next to the green ‘Yes’ button are words framed in an affirmative and comforting manner: “Means opting for an orderly winding-up of the scheme with a potential to realise fair value from the assets." Next to the red ‘No’ button are words framed in a scare-mongering and negative manner: “Means opting for the Scheme to be re-opened, potentially leading to distress sale of assets and loss of value.” 
 
This colouring and textual framing makes the entire e-voting process biased towards FTMF since we all have the perception of green signal and red signal embedded in our minds.
 
Everyone who sees a green signal at a traffic post will go ahead and would stop after seeing a red signal. Therefore, the use of this specific colour coding by FTML appears a deliberate attempt to influence the voting process.
 
The CFMA, an investor protection body fighting for the cause of investors, claims that the appointment of an observer for e-voting by SEBI is an afterthought. The SEBI release says, Mr Krishnamurthy was appointed as observer on 18 December 2020, following an order from the Supreme Court.
 
However, this appointment was made known by SEBI only on 26 December 2020 through the release, after the e-voting process had started and when it was a weekly off at the market regulator's office. 
 
Also, to assist the observer, the market regulator constituted a technical assistance team comprising BN Sahoo, chief general manager (CGM) of SEBI; Nayana Ovalekar, chief operating officer (COO) of Central Depository Services Ltd (CDSL); K Sriram, practising company secretary and scrutiniser; M Krishna and Ch E Sai Prasad, both assistant directors of the Hyderabad-based Central Forensic Science Laboratory (CFSL). 
 
In a release on 25th December, CFMA says it has filed an urgent interim application before the SC since SEBI failed to appoint an observer for voting that was scheduled to start from 26 December 2020. "The concern of CFMA is, though the aforesaid order was passed on the 9th of this month, there has been no apparent steps taken by SEBI to appoint an observer. FTMF choosing a weekend for voting and SEBI remaining silent on the observer shows that the duo does not want to keep the voting process transparent and unbiased," the investor organisation says. 
 
The SEBI release issued on 26th December says, Mr Krishnamurthy is appointed as observer on 18 December 2020. The question is: Why did SEBI, which is normally active in making its appointment known on the same day, wait for eight days for making the appointment of Mr Krishnamurthy known to investors of FTMF?
 
Franklin Templeton is seeking a simple-majority consent of its unit-holders to wind up six debt funds it had shut in April this year, which locked over Rs28,000 crore in the biggest forced fund closure ever in India.
 
The CFMA alleged that Sanjay Sapre, president of Franklin Templeton India and Santosh Kamath, managing director (MD) and chief investment officer (CIO) of FTMF-fixed income, have been pressuring unit-holders of six shut schemes to vote ‘YES' for winding up, hiding their own conflict of interests.
 
‘'Will the paid advisers compensate for the 50% loss to the unit-holders? At the time of subscribing to the schemes, these advisers have minted money and are now getting more money by coercing the investors to vote ‘Yes'. Will they take the responsibility of returning 100% money to the unit-holders? Will FTMF reverse the fees charged by it to compensate the losses of the unit-holders? Franklin Templeton has charged approximately Rs4,500 crore fees over the years,'' it asked.
 
The matter of loss will be pursued judicially along with a thorough investigation by the Economic Offences Wing (EOW), Chennai, the CFMA said, adding that the EOW and the courts will go through the forensic audit reports.
 
 The CFMA believed that the judiciary will ensure the best resolution for the unit-holders through proper liquidation and fixing responsibility for losses after evaluation of the forensic audit and the EOW investigation.
 
Earlier this month, the SC, while granting a stay on redemption requests from investors of FTMF, had directed the trustees to call a meeting of unit-holders to seek their consent within a week. On 24 October this year, the Karnataka High Court had asked Franklin Templeton Asset Management (India) Pvt Ltd (FTAMPL) to seek consent from unit-holders for winding up the six debt schemes. 
 
 Last month, Franklin Templeton Trustee Services, which initially had argued that mutual funds are empowered to wind up schemes without unit-holders' consent, sought permission from SEBI to hold a vote on the issue on 8th November.
 
The Karnataka High Court, in its judgement in October 2020, had said the decision of Franklin Templeton to wind up the six schemes cannot be implemented unless the consent of the unit-holders is obtained.
 
 Earlier, on 23 April 2020, Franklin Templeton had announced shutting down six debt fund schemes due poor and illiquid investments amid the coronavirus crisis, leaving lakhs of investors in a lurch. The total assets under management (AUM) of the six schemes were over Rs25,000 crore, spread across Franklin India Low Duration Fund, Franklin India Dynamic Accrual Fund, Franklin India Credit Risk Fund, Franklin India Short Term Income Plan, Franklin India Ultra Short Bond Fund and Franklin India Income Opportunities Fund.
 
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    COMMENTS

    sanjivrathi

    3 weeks ago

    SEBI OFFICIALS GET BIG KICKBACKS , WHY SHOULD THEY CARE !! ITS NOT THEIR MONEY. INVESTOR IS A FOOL !!

    vangalakrish

    3 weeks ago

    Forget the color, if we look around prior e-voting, it was obvious that FTMF lobbied hard with media and flurry of articles published everywhere that YES is a better option. After waiting for this long, the last thing investors wanted is haircut and I have feeling that FTMF has succeeded in its campaign of getting the desired result from investors.

    prakashkdora

    4 weeks ago

    Why do we investors fight among ourselves here. It is surprising to note that after closure of funds we are voting whether to close or not. I think everybody knows that FTMF is very careless/willfully careless in managing peoples money. Atleast due to CFMA or through other media the issue has been highlighted and monitored by court. On contrary what the market regulators has done so far and leave alone what is supposed to be done by them before the closure of funds by the Trustees.

    Udayan Dasgupta

    4 weeks ago

    I have never heard of a shareholder/investor meeting being called AFTER the vote on the matter to be discussed is to be cast! Clearly, this was not at the direction of the Supreme Court. I had sent a mail to FTMF asking them to reverse the order of meeting and voting (besides other points), and this is the wishy-washy reply I received:
    "There is no procedure prescribed in the regulation for convening meeting u/r 18(15)(c) of SEBI (Mutual Fund) Regulation 1996. We have therefore taken guidance from the relevant rules under the Companies Act 2013, hence your request of changing the order of the voting and meeting cannot be acceded to."
    The above is clearly Stuff & nonsense and shows the mala-fide intent of FTMF to mislead both the court and investors. Unit-holders should be wary of signing away their rights and falling prey to an unscrupulous company unwilling to accept liability for its wrongdoings.

    axpert1

    4 weeks ago

    The options of yes and no was in a very threating and scarry language. Atleast SEBI might have told them not to use any narration.

    axpert1

    4 weeks ago

    Sebi is known for its actions only at a later stage when retailers are left with no options.

    kararpan

    4 weeks ago

    Indeed, its totally a farcical exercise to deflect accountability & coercing the investor to clean up the dirt messed up by the FTMF stake holders. The e-voting page is a content of falacies to nudge the voter to toe their line. Truly reprehensible..

    bhaskar.jain

    4 weeks ago

    Have voted in lot of listed companies evoting but no one had any colour schemes. This voting is a farce.

    nadeemajshaikh

    4 weeks ago

    Small investors are always at the receiving end... and of course ... the regulators as usual... looking the other way...!!

    SImanchalratha

    4 weeks ago

    why do we stress the colouring as a game changer ?? If an investor puts money in debt category of mutual fund , he/she is knowledgeable enough to be not swayed by such colour coding . Secondly do you think panic selling of debt instruments will be a good option ?? At least a yes will salvage something from the sinking boat AT LEAST FOR A RETAIL INVESTOR . Big investors will be able to execute orders if distress redemption allowed leaving the smaller ones like us being a helpless onlooker . It seems you are hell bent on finding a problem .

    REPLY

    Ravi Bhat

    In Reply to SImanchalratha 3 weeks ago

    Absolutely. I haven't seen any article of moneylife talking positively about a single subject. I think they trive on people sentiment.

    debasish.raychawdhuri

    4 weeks ago

    People who decide their vote based on the color of the button don't deserve to have a vote anyway.

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